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Winfire When Ready: New DSL Assaults

Digital-subscriber line providers are starting to look like ominous robotic villains from a macabre video game or Chuck Jones cartoon. They're on the attack, and the hero is blasting away at them.

But as each of the digital competitive local-exchange carriers stumbles or evaporates, a Hydra-like cohort of clones materializes and continues the thump-thump-thump of a march ahead.

Here's the difference. The new players-especially the DSL resellers that haven't been lumbered with facilities-based baggage-are reinventing themselves as they trudge along.

For example, Winfire Inc., which has promoted its "FreeDSL" package in a handful of pilot markets, is ready to blast into 42 metro areas by year-end with its ad-supported service. The company also offers ad-free subscription plans for higher-speed access and had recently unveiled a bandwidth-on-demand feature. The first results of its "Very Interactive Video Ad" (VIVA) technology showed a 14-fold increase in click-through rates.

By December, Winfire plans to start tests on a pay-per-view option in Los Angeles.

Winfire is a well-financed Southern California start-up with more than 22,000 customers in 12 metro areas since its April debut. Atlanta, Dallas, Miami, New Orleans, Los Angeles and Orange County were the first markets, with Boston, Chicago, Houston, Austin, Tulsa and Orlando coming online in August. Winfire's target is 100,000 customers by year-end.

Of course, as a reseller, Winfire's availability is limited to the parts of each metro area in which telcos deliver DSL. Recent deals give Winfire assured connections when those facilities are ready.

Last month, the company completed a wholesale agreement to purchase at least 30,000 DSL lines from Verizon Communications by December, with additional lines to be added during the next five years. A 100,000-line deal with SBC Communications Inc. is also in the works.

Although Winfire touts FreeDSL, it has several upgrade options once it snags a customer. The free service runs at a relatively pokey 144 kilobits per second and is laced with banner advertising. For $19.95 per month, customers can get 384 kbps "PowerDSL" service without any ads, and for $39.95, there's "PremiumDSL" at speeds up to 1.54 Mbps. Customers that don't want to see ads on the basic service can pay $9.95 per month for the basic tier.

Winfire declines to break out the number of users who have signed up for each package. Subscribers must all buy a $199 modem connection kit, which they can finance in 23 monthly payments of $9.95.

Bandwidth-on-demand may be Winfire's best ammunition to upgrade its FreeDSL customers to higher speeds on anàla carte basis. About 15 percent of the current customer base has already used the feature, which lets them purchase more bandwidth instantly. Customers want higher speed to download hefty broadband applications, such as MP3 audio files, streaming full-motion videos and high-capacity video games.

Bandwidth-on-demand is used on a minute-by-minute basis but sold in three-hour bundles. FreeDSL and PowerDSL customers are upgraded temporarily to the 1.54 Mbps service. The three-hour package costs $9.95, six hours sell for $7.95 and the 12-hour offer is priced at $10.95.

Winfire's business model-presented as a triangular connection of customers, content and carriers built around Winfire's Network Operating System-calls for alliances with advertising and content companies. President and founder Chad Steelberg (a former top executive at AdForce, the Web ad-serving network), said the company has content deals with 600 providers, who pay for preferred presence on the toolbar at the bottom of the screen.

That proprietary toolbar-a sort of "narrow portal"-is actually a stand-alone software application that allows users to log onto the Internet and navigate the Web with one-click access to specific sites.

Among the first content providers are ESPN, House of Blues and Universal Music Group.

On the advertising side, NextCard, the popular Internet credit card aimed at young customers, was the first user of the "Very Interactive Video Ad" (VIVA) technology. The VIVA ad-a specially produced streaming-video commercial-generated a 7 percent response rate, well above traditional 0.5 percent click-through rates.

The next targets on Winfire's march are connections to the cable and broadband wireless arenas. Steelberg said he has held talks with AT & T Broadband; the Winfire package has also been tested through Cisco's presence on MMDS systems.

It's the kind of rollout that makes you realize in this high-speed race, some DSL guys-like Winfire-are firing on all pistons.

I-Way Patrol columnist Gary Arlen covers his eyes when the Hydra-like characters appear on the screen.